Dual Currency

THE government is likely to adopt a dual currency system that could bring

back the Zim dollar alongside the United States currency if the government

fails to resolve the liquidity crisis and to convince multilateral

institutions to lend money, an analyst has said.

Zimbabwe ditched its local currency after being rendered worthless by

hyper-inflation which topped 500 billion percent and adopted the

multi-currency system dominated by the US dollar in February 2009.

It has enjoyed an economic growth rate averaging seven percent since then

and inflation fell to 0.86 percent in September but GDP growth is seen

slowing to three percent this year after President Robert Mugabe's Zanu PF

party claimed a decisive victory in the July 31 elections disputed by the

opposition.

Finance minister Patrick Chinamasa has said the regime will continue

indefinitely but Tony Hawkins, the head of the University of

Zimbabwe's Graduate School of Management said the tightening liquidity in

the economy could force a rethink and that there was always the risk that

politicians would seek a "superficially attractive" way out to finance

campaign promises.

"I suspect - perhaps fear - that the government will opt for some dual

currency option," said Hawkins in a presentation of the 2014 economic

outlook on Wednesday.

An International Monetary Fund (IMF) delegation is in the country to

assess progress made in implementing the Staff Monitored Programme (SMP),

which if successful, could help it clear $10 billion in external debts and

give it access to new credit from international lenders although that is

unlikely to happen soon.

"Given the IMF forecast of a sluggish global economy and the third

successive year (in 2014) of decline in non-fuel commodity prices,

Zimbabwe can expect little in terms of an external stimulus to growth," he

said.

"This means growth must be domestically-driven in an economy where the

government budget is under enormous pressure and there is no scope for a

fiscal stimulus."

Information minister Jonathan Moyo recently said the Zanu PF party

election manifesto left the door open for the return of the local currency

to circulate along with the multiple-currency, although not in the

foreseeable future.

The government has adopted a new economic blue print, Zimbabwe Agenda for

Sustainable Socio-Economic Transformation (ZimAsset) which projects a GDP

growth of 6.1 percent in 2014 and 9.9 percent by 2018 but Hawkins said the

plan failed to explain where the investment would come from.

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President Mugabe told a party meeting on Friday that government expects

more money from diamond sales after the European Union removed sanctions

on the state-owned Zimbabwe Mining Development Corporation.

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